A five-year bond with a yield of 7% (continuously compounded) pays a 5.5% coupon at the...

A five-year bond with a yield of 7% (continuously compounded) pays a 5.5% coupon at the end of each year.

What is the bond’s price?
What is the bond’s duration?
Use the duration to calculate the effect on the bond’s price of a 0.3% decrease in its yield.
Recalculate the bond’s price on the basis of a 6.7% per annum yield and verify that the result is in agreement with your answer to (c).

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Expert Solution

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

Cell reference -

jeff jeffy answered 2 weeks ago

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